Cost Behavior Analysis in a Restaurant: High$-$Low Cost Estimation

Assume a Potbelly's restaurant has the following information available regarding costs at representative levels of monthly sales:

Monthly sales in units

$5,0008,00010,000$

Cost of food sold $ $10,000$ $ $16,000$ $ $20,000$

Wages and fringe benefits $4,2004,3204,400$

Fees paid delivery help $1,1001,7602,200$

Rent on building $1,1001,1001,100$

Depreciation on equipment $900900900$

Utilities $8009201,000$

Supplies $($soap$,$ floor wax, etc.$)250340400$

Administrative costs $1,7001,7001,700$

Total $ $20,050$ $ $27,040$ $ $31,700$

$($a$)$ Identify each cost as being variable, fixed, or mixed.

Cost of food sold

Answer $1$

Wages and fringe benefits

Answer $2$

Fees paid delivery help

Answer $3$

Rent on building

Answer $4$

Depreciation on equipment

Answer $5$

Utilities

Answer $6$

Supplies $($soap$,$ floor wax, etc.$)$

Answer $7$

Administrative costs

Answer $8$

$($b$)$ Use the high$-$low method to develop a schedule identifying the amount of each cost that is mixed or variable per unit. Total the amounts under each category to develop an equation for total monthly costs.

Round variable cost answers to two decimal places.

Fixed Costs Variable Costs

Cost of food sold

Answer $9$

Answer $10$

X

Wages and fringe benefits

Answer $11$

Answer $12$

X

Fees paid delivery help

Answer $13$

Answer $14$

X

Rent on building

Answer $15$

Answer $16$

X

Depreciation on equipment

Answer $17$

Answer $18$

X

Utilities

Answer $19$

Answer $20$

X

Supplies $($soap$,$ floor wax, etc.$)$

Answer $21$

Answer $22$

X

Administrative costs

Answer $23$

Answer $24$

X

Total costs equation

Answer $25$

Answer $26$

X

$*$ where X $=$ Unit sales

$($c$)$ Predict total costs for a monthly sales volume of $9,800$ units.

$

Answer $27$